OSLO, Feb 8 Oil firm Statoil is
lifting capital spending this year as it bets on the development
of shale oil in the United States to help raise its output by a
third over the next decade.

The Norwegian firm said it was targeting capex in 2012 at
$17 billion, up from $16 billion, following its $4.4-billion
acquisition of U.S. independent oil firm Brigham Exploration in
October and its shale oil deposits in North Dakota and Montana.

Statoil is echoing a trend across the oil and gas sector,
with BP and Shell announcing increased spending
this year, prompting fears from investors that the ability to
raise dividends will be eroded.

Trapped in deep rock formations, shale oil is extracted
using new technologies like hydraulic fracturing - or "fracking"
- and directional drilling. A U.S. shale-oil boom is lowering
the country's dependency on energy imports.

Statoil is also betting big on unconventional gas resources
in the United States, identified as one of its key growth areas.

It has a stake with Chesapeake in the Marcellus
shale gas project in the northeastern United States and owns
acreage in the Eagle Ford prospect in Texas, together with
Canada's Talisman.

The hiked capex figure indicates Statoil may be looking to
buy more shale oil acreage around its Brigham property, said
Magnus Smistad, an analyst at Oslo-based firm Fondsfinans.

"It could mean they are looking at acquisitions, and if so I
would expect it to be in the Williston basin in North Dakota and
Montana," said the analyst, who regarded Statoil's move in shale
oil as very positive.

Another analyst was more cautious.

"Most people have been quite ambivalent (to the Brigham
deal)," said Kim Evjenth at ABG Sundal Collier, adding that
shale oil was more expensive to produce.

"There could be some environmental concerns. But so far
there doesn't seem to be any problem in North Dakota."

Underlining the potential risk of investing in
unconventional resources, Statoil's chief executive told Reuters
his company would reduce Marcellus Shale investments in 2012,
when U.S. gas prices are expected to stay low amid the shale-gas
production bonanza.

"We are taking down the investment level between 2011 and
2012. We live off money, not volumes," said Lund.

Unlike gas, which needs more infrastructure to transport to
customers, shale oil is part of the global crude market. The
infrastructure to drill for it, moreover, is more flexible than
the North Sea platforms Statoil is accustomed to, and can be
shut down more easily if prices fall.

Together with hiked output in the Gulf of Mexico, growing
shale production will push U.S. oil output to 6.7 million
barrels per day in 2020, 11 percent higher than the previous
forecast and the highest level of U.S. oil output since 1994,
the U.S. Energy Information Administration said in an analysis
in January.

Statoil will continue to seek to grow its annual cash
dividend after announcing its hike in 2012 capital spending, the
firm's chief financial officer told Reuters.

MAINTAINS PRODUCTION TARGETS, SHARE PRICE UP

For the first time in years Statoil found more oil and gas
than it produced in 2011, with a replacement ratio of 117
percent compared with 87 percent in 2010 and 34 percent in 2008.

"This strengthens our 2020 goal," Statoil's Lund told a news
conference. The firm wants to produce 2.5 million barrels of oil
equivalent per day (boed) in 2020, compared with 1.89 million
boed in 2010.

The firm kept its production targets for 2012, which imply
an equity output of some 2 million boed, considered overly
optimistic by several analysts ahead of the results. Lund also
said he saw an upside risk to the targets.

Statoil has frequently set production targets that were
revised downwards months later.

It gives its outlook in terms of equity production, a term
used by the firm to reflect volume it would have received if its
oil and gas contracts gave the rights to a share of production
equivalent to its share of expenditure.

"The main takeaway was that a couple of concerns were
addressed positively - reserve replacement, which they did quite
nicely on and the other was the production outlook for 2012,
which they reiterated," said Evjenth at ABG Sundal Collier.

"That's two factors driving the share up. The third is that
they realised gas prices of 2.25 Norwegian crowns per cubic
metre in the quarter. That's pretty good."

Shares in Statoil were up 1.7 percent at 1038 GMT, ahead of
a European oil and gas index up 0.1 percent.

Oil and gas net entitlement output in the fourth quarter
rose year-on-year to 1.78 million barrels of oil equivalent per
day (boed). Production was expected to fall to 1.75 million
boed, compared with 1.768 million boed last year.

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